Correlation Between Permianville Royalty and Petroleo Brasileiro

Can any of the company-specific risk be diversified away by investing in both Permianville Royalty and Petroleo Brasileiro at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Permianville Royalty and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Permianville Royalty Trust and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Permianville Royalty and Petroleo Brasileiro and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Permianville Royalty with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permianville Royalty and Petroleo Brasileiro.

Diversification Opportunities for Permianville Royalty and Petroleo Brasileiro

0.49

Correlation Coefficient

Permianville Royalty  Petroleo Brasileiro

Very weak diversification

The 3 months correlation between Permianville and Petroleo is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Permianville Royalty is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Permianville Royalty Trust are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between Permianville Royalty and Petroleo Brasileiro

Considering the 90-day investment horizon Permianville Royalty Trust is expected to generate 1.37 times more return on investment than Petroleo Brasileiro. However, Permianville Royalty is 1.37 times more volatile than Petroleo Brasileiro Petrobras. It trades about -0.02 of its potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about -0.03 per unit of risk. If you would invest  164.00  in Permianville Royalty Trust on August 31, 2024 and sell it today you would lose (6.00) from holding Permianville Royalty Trust or give up 3.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Permianville Royalty Trust  vs.  Petroleo Brasileiro Petrobras

Permianville Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permianville Royalty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Permianville Royalty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Permianville Royalty and Petroleo Brasileiro

The main advantage of trading using opposite Permianville Royalty and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permianville Royalty position performs unexpectedly, Petroleo Brasileiro can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Petroleo Brasileiro will offset losses from the drop in Petroleo Brasileiro's long position.

The idea behind Permianville Royalty Trust and Petroleo Brasileiro Petrobras pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.